HKSAR v. LIU SU KE

HCMA518/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 518 OF 2009

(ON APPEAL FROM ESS 45475-6 OF 2008)

____________________

BETWEEN

____________________

_______________

J U D G M E N T

_______________

1.  The Applicant was convicted on 2 June 2009 by Mr Douglas T H Yau of two summonses in respect of his failure to make the requisite disclosure to the Stock Exchange of Hong Kong and Warderly International Holdings Limited (“Warderly”) respectively, within three days of becoming aware, on 31 August 2007, of his interest in 231.8 million Warderly shares contrary to sections 310(1)(a), 313(1)(a), 324, 325(1)(b) and 328(a)(ii) of the Securities and Futures Ordinance, Cap. 571. The summonses were issued in December 2008.

2.  The Applicant’s appeal against those convictions was dismissed by this Court on 25 November 2009. There was no appeal in respect of the fines for $5,000 imposed in respect of each conviction. The court made an order nisi in respect of costs in favour of the Respondent and, having received submissions from the Applicant and the Respondent, made that order absolute on 31 December 2009.

3.  The two summonses amended in the course of the trial were similar in nature and alleged that, without reasonable excuse, the Appellant had failed, as required, to notify, firstly, Warderly and, secondly, the Stock Exchange of Hong Kong Limited -

“...of your interest in 231,800,000 shares comprised in the relevant share capital of Warderly International Holdings Limited, a listed corporation, within the period specified in section 325(1)(b) of the SFO, i.e. within three business days after 31 August 2007, on which date you became aware that, on 28 December 2006, those shares were pledged to you, alternatively, were subject to an equitable mortgage in your favour and you acquired an interest in those shares which acquisition caused you to come under a duty of disclosure because you had a notifiable interest immediately after but did not have a notifiable interest immediately before the acquisition”.

4.  By a notice of motion dated 22 December 2009, pursuant to section 32 of the Hong Kong Court of Final Appeal Ordinance, Cap. 484, the Applicant seeks an extension of time, alternatively, such time for making the application be abridged and that leave be granted to the Applicant to appeal to the Court of Final Appeal on the ground that there are questions of law of great and general importance, particulars of which are:

“(a) whether in respect of section 328 of the Securities and Futures Ordinance, Cap. 571, the burden of proof of establishing the absence of a reasonable excuse is upon the prosecution or the accused; and

(b) on the basis that the Applicant has a right to review of his conviction by a higher tribunal under article 11(4) of the Bill of Rights and/or article 14.5 of the International Covenant on Civil and Political Rights as incorporated into the Basic Law under section article 39 of the Basic Law and upon the basis that an appeal from a conviction by a magistrate pursuant to section 113 of the Magistrates Ordinance, Cap. 227, is such a review, in what circumstances should the court that hears such an appeal under section 113 be permitted to order that the Appellant in such an appeal pay the costs of the Respondent”.

5.  In the Applicant’s written submission dated 11 January 2010, it was proposed that the first question be supplemented by the addition of “or alternatively, whether the accused has any evidential burden in establishing a defence of reasonable excuse”.

6.  In an affirmation dated 23 December 2009, Mr Leung Ping-chu, a partner of the Applicant’s firm of solicitors, in seeking the leave of this Court to extend or abridge time to make the application to this Court for certification, sought to explain the circumstances in which the need to do so arose.

7.  At the outset, he acknowledged that he was aware of the provisions of the Hong Kong Court of Final Appeal Ordinance, the Hong Kong Court of Final Appeal Rules and Practice Direction 2.2, ‘Criminal Appeals to the Court of Final Appeal’. In particular, he stated that he was aware of paragraph 3 of that Practice Direction, namely: “Applications for a certificate to the Court of Appeal or the Court of First Instance that the decision involves a point of law of great and general importance should be made immediately after the judgment is given from which the appeal is to be brought.” The words “immediately after” are in italics in the text.

8.  In short, Mr Leung explained that although the judgment was delivered on 25 November 2009, because of the commitments of the four counsel who appeared for the Applicant, the first opportunity the Applicant had to meet counsel was on 3 December 2009. There followed a delay in which steps were taken to obtain a second opinion from another leading counsel. On 12 December 2009, Mr Bruce, Senior Counsel, was instructed.

9.  For reasons not explained, on 16, 18 and 19 December 2009, attempts were made to file material with the Registry of the Court of Final Appeal. The Registry declined to accept the material. On the advice of Mr Bruce, the notice of motion was filed with this Court on 22 December 2009.

10.  Mr Bell, on behalf of the Respondent, submits that the explanations provided to the Court provide no basis for the Court to exercise its discretion to grant the Applicant an extension or abridgement of time, which explanations he characterises as “manifestly unreasonable” and lacking “credibility”. He invites the Court to dismiss the application for an extension or abridgement of time to make this application.

11.  Whilst there is force in the points made by Mr Bell about the dilatory way and less than competent manner in which the Applicant’s solicitors conducted themselves in bringing this matter before the Court, in my judgment, nevertheless, it is appropriate to grant the requisite extension of time. I do so.

Submissions made on behalf of the Applicant

12.  First of all, Question 1. On behalf of the Applicant, it was submitted that the issues raised by the Applicant in respect of the nature of the burden of proof in construing the phrase “without reasonable excuse” in the context of the provisions upon which the two summonses were based were reasonably arguable. It was contended that the elements of the offence provided for by section 114(3) and (9) of the Ordinance considered by Madam Justice Barnes in her judgment in The SFC v Yu Ka Fai (unreported; HCMA 62/2007 9 November 2007), are very similar to those in section 328A of the Ordinance.

13.  It was noted that this Court had not sought to distinguish her determination. It is accepted that the provisions were different but contended that “it would obviously be unusual that in one particular section, the prosecution has to bear the full burden whilst in another section under the same ordinance, written with similar language, the Defendant has to bear the evidential burden to raise the issue of ‘without reasonable excuse’”.

14.  In consequence, it was submitted that the arguments advanced by the Applicant in the appeal were correct, namely, on a proper construction of the provision and the burden of establishing the absence of reasonable doubt is upon the prosecution. In the alternative, it was submitted that the Applicant had neither an evidential nor a persuasive burden in raising the issue of whether the conduct was “without reasonable excuse”.

15.  Turning then to Question 2, it was submitted on behalf of the Applicant that even if this Court had concluded that all the grounds advanced on behalf of the Applicant had failed and the Court reached the same determination as the magistrate, “it does not automatically mean that there is no merit in the submissions advanced”.

16.  More particularly, it was contended that the arguments advanced in support of the Applicant in respect of the construction of the phrase “without reasonable excuse” were arguable grounds. Advancing such grounds was “within the Applicant’s right to appeal pursuant to article 11(4) of the Bill or Rights and/or article 14.5 of the International Covenant on Civil and Political Rights as incorporated into the Basic Law under article 39 of the Basic Law”.

The Respondent’s Submissions

17.  The Respondent opposes the certification sought in respect of the issues identified in both questions.

18.  Question 1: Of Question 1, Mr Bell pointed out that of the authorities relied upon on behalf of the Applicant, only the judgment in SFC v Yu Ka Tak is concerned with the construction of the phrase “without reasonable excuse” in the context of the same Ordinance. However, he goes on to point out that, “Section 114 deals with an entirely different activity, namely performing regulated functions without a licence from that prescribed by section 328”.

19.  In submitting that the issue is not one of great and general importance, Mr Bell submitted that resolution of the issue is of limited scope, being the construction of that phrase in its specific statutory context only.

20.  Furthermore, he submitted that the duty of disclosure imposed under section 328 of the Ordinance is unlikely to be one imposed upon anyone other than a “very limited number of persons within Hong Kong”. In support of that proposition, he points to the fact that the duty of disclosure arises only in respect of a notifiable interest in the share capital of a listed company, which notifiable interest is 5 per cent of its issued share capital.

21.  Turning then to Question 2: Of Question 2, Mr Bell pointed out that the circumstances in which a court hearing an appeal under section 113 of the Magistrates Ordinance is permitted to order the Appellant to pay the Respondent’s costs are clear, namely, as provided for by section 13 of the Costs (in Criminal Cases) Ordinance, Cap. 492, where “the judge is satisfied that the appeal or the application, as the case may be, is or was without merit”. Accordingly, the resolution of the issue was not a matter of great and general importance.

22.  Secondly, Mr Bell pointed out that the gravamen of the complaint made on behalf of the Applicant was that this Court was wrong to determine the appeal as it had done because the appeal had merit. That was a matter that could only arise in relation to this particular appeal. It had no impact on any other case and therefore was not of great and general importance.

A Consideration of the Submissions

23.  I turn then to a consideration of the submissions. First, Question 1. This Court’s construction of the phrase “without reasonable excuse” was in respect of section 328(a) of the Ordinance in conjunction with the other provisions relied upon in the two summonses. Section 328 falls within Part XV of the Ordinance which is entitled ‘Disclosure of Interest’. The section falls within ‘Division 4 Requirements for giving Notification’. Within Part XV, it is to be noted that there are other offence-creating provisions which contain the phrase “without reasonable excuse” - see sections 334 and 351 which deal with failure to make requisite notification. No doubt, there may be a persuasive argument that these three separate sections ought to be construed in the same way.

24.  By contrast, section 114 falls within Part V of the Ordinance which deals with ‘Licensing and Registration’, the subtitle for the section being ‘Restriction on Carrying on Businesses and Regulated Activities’. It follows that in construing the phrase “without reasonable excuse” in the context of section 114(3)(b) and (9) in Yu Ka Tak, Madam Justice Barnes was dealing with a completely different offence-creating provision. She was not concerned with issues of failure to give requisite notification, rather with holding oneself out as performing a regulated function without being licensed, registered or authorised and so conducting oneself without reasonable excuse.

25.  There is some force in Mr Bell’s point that the number of persons likely to be affected by operation of section 328 of the Ordinance is limited in that the duty of notification only falls upon those who hold an interest of 5 per cent or more of the shares of a publicly-listed company and whose interest changes.

26.  Another indicia of whether the matter is of general importance is perhaps the number of prosecutions mounted for contravention of the provision. As I understand from the statistics provided to the Court at its request, since 1 April 2003, at all events until the last few weeks, that is to say a period, in total, of six years and nine months, some 381 summonses have been issued against just over 100 defendants. In 2008, the Applicant was one of 10 defendants against whom a total of 28 summonses were issued.

27.  In the result, despite the elegant submissions of Mr Bruce, in my judgment, no issue of law of great and general importance arises.

28.  Turning to Question 2. The second question posed for certification invites the determination of the circumstances in which the court that hears an appeal under section 113 should be permitted to order that the Appellant in such an appeal pay the costs of the Respondent. In my judgment, the Ordinance itself provides the answer to that question in clear terms, namely, when the appeal is “without merit”. The law is clear. Its application to the circumstances of the Applicant was merely case sensitive.

29.  In my judgment, there is no issue of great and general importance and it is for the reasons given that I decline to so certify.

Costs

30.  It not being opposed by Mr Bruce, on Mr Bell’s application, I make the following order, that the costs of this application are to be reserved to the Appellate Committee of the Court of Final Appeal. In the event that this application is not pursued, costs to the Respondent.

Representation: